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It seems hard to separate Michael Dell from the company he founded all those years ago as a college student with a talent for building personal computers.
Dell, the company, learned that lesson the hard way when Michael Dell stepped down from his leadership position in 2004 and his hand-picked successor, Kevin Rollins, took the reins as CEO. Less than two years later, as Dell watched its share of PC shipments fall, questions raised about its finances and customers asking for better products and more services, the company looked back to its founder to make things right again.
On Jan. 31, Michael Dell will mark his one-year return as CEO in charge of the day-to-day operations of his company. The results, so far, have been refreshing-a departure from the way the company had been run-but more work needs to be done.
“I’d say that we have had a very positive improvement with our relationship with Dell during the last year,” said Lew Moorman, senior vice president for Strategy and Corporate Development at hosting company Rackspace, a large Dell customer. “I don’t know how much of that is because of leadership change, but in terms of them being more customer-centric and listening more, we have seen a big improvement-both from a product standpoint and a customer relationship standpoint. We feel that we are in much better hands than we were 18 months ago.”
In the last 12 months, at least, Michael Dell’s return seems more reminiscent of Steve Jobs’ return to Apple, which rebounded with a vengeance, rather than Ted Waitt’s return to Gateway’s front office. (Gateway never full rebounded and was acquired in 2007 by Acer for $710 million.)
“Michael Dell’s return was a very dramatic event and I think you have seen that instead of a rip-and-replace plan, there has been a much more methodical approach and a look at what has been working and a look at where they can shore up the weak points,” said Charles King, an analyst with Pund-IT Research.
Under Dell’s renewed leadership, the company has introduced a number of new products for the enterprise, embraced Linux for its PCs, connected with customers through its IdeaStorm and Direct2Dell blogs, dropped the religion of direct sales for a channel strategy and expanded through strategic acquisitions.
Michael Dells Buying Spree
For years, Dell avoided acquiring companies, but circumstances have changed and in order for the company to grow, analysts say they believe a spending spree was needed and that Michael Dell’s shopping list helped Dell in two key areas for enterprise customers.
The $1.4 billion purchase of EqualLogic shored up Dell’s storage division and stands as the largest purchase in company history. Dell already had a deep relationship with EMC, but the EqualLogic move reinvigorated its internal storage division, which had fallen behind rivals Hewlett-Packard and IBM, and gave it a strong foothold in the growing field of iSCSI storage.
“What really has impressed me,” King said, “is that since Mike Dell’s return, the company has moved forward with some very specific products and has made bold changes through acquisitions, which it had never prided itself on before.”
On the other side, the acquisitions of SilverBack Technologies, Everdream and ASAP Software have helped Dell extend both its nascent channel offerings and its services divisions, which had lagged behind its competition for years.
Steve Baker, an analyst with the NPD Group, said in the next year Dell has to not only keep up with its channel strategy to ensure that works and gets better as time passes, but also has to keep up with its acquisitions and then integrate those parts into the company’s portfolio.
“In terms of acquisitions, they really don’t have the time to sit back and absorb what they did,” Baker said, adding that Dell will likely continue to focus on acquisitions that help it with storage and with services. “They have to constantly make sure these acquisitions are worthwhile and help the company keep up with the pace of technology. Dell has to keep its foot on the accelerator in order to keep up its advantage.”
Losing Dell’s religion
Perhaps the most controversial move by Dell in the last 12 months was its embrace of a channel program after having preached a direct sales model since the company began. Besides technology and services, the acquisition of EqualLogic and other companies played into channel strategies as well.
The program that Dell developed over the course of 2007 includes a deal registration component protecting deals of $75,000 and greater, and other benefits for partners. Yet EqualLogic, SilverBack and potential Dell reseller partners remained skeptical. Many told eWEEK that they were adopting a wait-and-see approach to their relationship with the PC maker. The test of the program in gaining channel partner trust would be in the execution.
“It will take time, consistency, commitment, communication and a willingness to work in collaboration with the channel and not in conflict,” said Tiffani Bova, research director of IT Channel Sales, Programs and Alliances for research firm Gartner. “It has to happen from the senior levels of the company all the way down to an inside sales rep. Inconsistency or sales efforts which do not align to this new effort will quickly hinder Dell’s ability to gain trust from the channel.”
Dont Fuss with the Enterprise
One area that Dell changed little is the company’s core commercial PC business, Baker said.
While the company did introduce new technologies, such as mobile workstations with solid state drives, most the advances were left to improving PCs for consumers as well as for small and midsize businesses. In July, Michael Dell personally introduced the Vostro line of PCs for smaller companies, which were simpler to install, inexpensive and eliminated “bloatware.”
With the direction the company has taken its core PC business, it has managed to stem its losses in the worldwide PC market. IDC found that Dell shipped nearly 40 million PCs in 2007, an increase of 2.3 percent compared with the previous year. While not a huge step forward, several analysts agreed that Dell’s move into retail and consumer markets helped reverse some of the losses. Dell also has its eye on emerging markets and recently opened a new facility in Poland in January to better supply Eastern Europe.
Dell also maintains its No. 1 ranking as the PC vendor of choice for the enterprise, according to Forrester Research. For now, however, midmarket and consumer business remains its main focus.
“They have been much more responsive to the midmarket and to their consumer users in general,” Baker said. “Right now, those are the biggest opportunities and the fastest-growing segment of the market.”